COST AND MANAGEMENT ACCOUNTING SOLVED QUESTION …

[Pages:34]COST AND MANAGEMENT ACCOUNTING SOLVED QUESTION PAPER JUNE 2017

Q.1. You are required to report to top management of eastern India engineering company the point of sales in terms of Rupee to break even for the purpose you obtain that:

Fixed overheads remain constant at Rs. 12,000 Variable costs will rise zero to Rs.12,000 Selling price is Rs. 600 per ton The tonnage produced and sold is 30 tons

(A) Rs.36,000 (B) Rs.32,000 (C) Rs.30,000 (D) Rs.38,000

Answer:- (A)

Explanation:- Break even point = Fixed cost = Rs. 12,000 = Rs.36,000

P/V ratio

33.33%

Working notes

1. P/V ratio = contribution * 100 = 200 * 100 = 33.33%

Sales

600

2. Variable cost

(a) = Rs. 12,000

Units

(b) = 30 tons

Variable cost per unit (a)/(b) = Rs.400 per unit

3. Contribution per unit = Sales - variable cost per unit = Rs. 600- Rs. 400 = Rs. 200

Q.2. In a period sales amount to Rs.2,00,000, net profit Rs.20,000 and fixed overheads are Rs. 30,000. If sales Rs. 3,00,000 profit will be:

(A) Rs.48,000

(B) Rs.50,000 (C) Rs.40,000 (D) Rs.45,000

Answer:- (D)

Explanation:-

Sales -Variable cost Contribution -Fixed cost Profit

Given 75% on sales 25% on sales Given

3,00,000 2,25,000 75,000 30,000 45,000

Working notes

1. Sales -Variable cost Contribution -Fixed cost Profit

Given

Given Given

2,00,000 1,50,000 50,000 30,000 20,000

Reverse

2. P/V ratio = contribution * 100 = 50,000 * 100 = 25%

Sales

2,00,000

calculation

Q.3. Reliance furniture house places before you the following trading results:

Year 2015 2016 Fixed cost will be :

Units 10,000 12,000

Total cost 80,000 90,000

Sales 1,00,000 1,20,000

(A) Rs.15,000 (B) Rs. 10,000 (C) Rs.30,000 (D) Rs.60,000

Answer:- (C)

Explanation:- Fixed cost = Total cost ? variable cost Fixed cost = 80,000- (10,000*Rs.5p.u) = 80,000- 50,000 = Rs. 30,000 OR Fixed cost = 90000- (12,000*Rs.5p.u) = 80,000- 60,000 = Rs. 30,000

Working Notes

1. Variable cost per unit = change in total cost = Rs.90,000 ? Rs. 80,000 = Rs. 10,000 = Rs.5 per unit

Change in units

12,000 - 10,000

2,000

Q.4. A factory engaged in manufacturing plastic buckets is working at 40% capacity and produces 10,000 buckets per annum. The present cost break up for one bucket is as under.

Material Rs. 10 Labour Rs. 3 Overheads Rs. 5 ( 60% fixed)

The selling price per bucket Rs.20. If factory operates 90% of capacity the profit will be:

(A) Rs.75,000 (B) Rs. 80,000 (C) Rs.82,500 (D) Rs.92,500

Answer:- (C)

Explanation:-

At 22,500 units of bucket

Particulars Sales CONTRIBUTION -Fixed cost Profit

Per unit (Rs.)

Total cost (Rs.)

20

4,50,000

25% of sales

1,12,500

See working notes 30,000

82,500

At 90% capacity units of buckets is = 10,000 * 90% = 22,500 units 40%

Working Notes

1. Calculation of variable cost per unit

Material

10

Labour

3

Overheads (Rs. 5*40%)

2

15

2. Fixed cost per unit = Rs. 5 * 60% = Rs. 3

3. At 10,000 units of bucket

Particulars Sales -variable cost CONTRIBUTION -Fixed cost Profit

Per unit (Rs.) 20 15

3

Total cost (Rs.) 2,00,000 1,50,000 50,000 30,000 20,000

4. P/V ratio = contribution * 100 = 50,000 * 100 = 25%

Sales

2,00,000

Q.5. Rowan premium plan is an improvement over:

(A) Taylor plan (B) Gantt bonus plan (C) Halsey Premium plan (D) None of the above

Answer:- (C)

Explanation:- Rowan premium plan is an improvement over is Halsey premium plan

Q.6. A company has fixed costs of Rs.90,000 with sales of Rs.3,00,000 and profit of Rs.60,000. Margin of safety will be :

(A) Rs. 1,00,000 (B) Rs. 1,20,000 (C) Rs. 1,50,000 (D) Rs. 1,30,000

Answer:- (B)

Explanation:- Margin of safety(MOS) = Profit = 60,000(Given) = Rs. 1,20,000 P/v ratio 50%

Working Notes

1. P/V ratio = contribution * 100 = 1,50,000 * 100 = 50%

Sales

3,00,000

2. Contribution = fixed cost + profit = Rs. 90,000 + Rs. 60,000= Rs.1,50,000

Q.7. A company sells its product at Rs. 15 per unit. In a period if it produces and sells 8,000 units, it incurred a loss of Rs. 5 per unit. If the value is raised to 20,000 units, it earns profit of Rs. 4 per unit. Break even profit in units will be:

(A) 13,000 units (B) 12,000 units (C) 14,000 units (D) 10,000 units

Answer:- (B)

Explanation:- Break even point (units) = Fixed cost = 1,20,000 = 12,000 units Contribution 10

Working Notes

1. P/V ratio = Change in profit* 100 = 1,20,000 * 100 = 66.666%

Change in sales

1,80,000

2. Units

8,000 20,000

Sales per unit (Rs.) 15 15

1,20,000 3,00,000 Difference 1,80,000

Profit/ (loss) Per unit (Rs.) (5) 4

Profit/ (loss) (Rs.)

(40,000) 80,000 Difference 1,20,000

3. Contribution per unit(Rs.) = sales per unit * p/v ratio = Rs. 15* 66.666% = Rs. 10 per unit

4. At 8,000 units Contribution -Fixed cost Profit/(loss)

Rs. 10 Given

80,000 1,20,000 (40,000)

Reverse

calculation

Q.8. The cost accountant of M Ltd has ascertained the selling price of a product is Rs.20 per unit. Variable cost is Rs. 15 per unit and break even point is 21,600 units. Management has decided to treat 12,000 units of B.E.P because production department cannot produce more than this at the moment. The selling price for 12,000 units B.E.P will be:

(A) Rs. 20 per unit (B) Rs. 24 per unit (C) Rs. 26 per unit (D) Rs. 28 per unit

Answer:- (B)

Explanation:- Selling price = contribution + variable cost = Rs. 9 + Rs. 15 = Rs. 24 per unit

Working notes

1. For 21600 units

BEP = Fixed cost =: 21600 units = fixed cost

Contribution

(Rs. 20-15)

Fixed cost = 21600 units * Rs. 5 = Rs. 1,08,000

2. For 12,000 units

BEP = Fixed cost =: 12,000 units = Rs.1,08,000

Contribution

Contribution

Contribution = Rs.1,08,000 = Rs. 9 12,000

Q.9. Yadhav co. has annual fixed cost of Rs. 1,20,000. In 2015 sales amounted to Rs. 6,00,000 as compared to Rs.4,50,000 in 2014 and profit in 2015 was Rs. 50,000 higher than in 2014. If there is no need to expand the company's capacity. The profit or loss in 2016 on forecasted sales of Rs.9,00,000 will be:

(A) Rs. 1,80,000 (B) Rs. 1,90,000 (C) Rs. 1,70,000 (D) Rs. 1,85,000

Answer:- (A)

Explanation:- Profit = contribution ? fixed cost = Rs. (3,00,000 ? 1,20,000) = Rs. 1,80,000

Working notes

1. Change in sales = Rs. 600000- Rs. 450000 = Rs. 1,50,000

2. P/V ratio = Change in profit* 100 = 50,000 * 100 = 33.33%

Change in sales

1,50,000

3. Contribution = sales * p/v ratio = Rs. 9,00,000 * 33.33% = Rs. 3,00,000

Q.10. A company manufactures and sells there types of products namely A,B and C, total sales per month is Rs.80,000 in which the shares of these three types of products are 50%,30%,20% respectively. Variable costs of these products are 60%,50% and 40% respectively :

(A) 49% (B) 48% (C) 47% (D) 50%

Answer:- (C)

Explanation:- Calculation of combined p/v ratio combined P/v ratio = p/v ratio * sales weight

Product A B C Total

Sales share 50% 30% 20%

p/v ratio 40% 50% 60%

Working notes

1. Calculation of p/v ratio P/v ratio = 1- variable cost

Product A B C

Variable cost 60% 50% 40%

Combined P/v ratio 20% 15% 12% 47%

P/v ratio = 1- variable cost 40% 50% 60%

Q.11. A plant produces a product in the quantity of 10,000 units at a cost of Rs. 3 per unit. If 20,000 units are produced, the cost per unit will be Rs. 2.50, selling price per unit is Rs. 4. The variable cost per unit will be :

(A) Rs. 2 (B) Rs. 3 (C) Rs. 4 (D) Rs. 1

Answer:- (A)

Explanation:- variable cost per unit = Change in cost = ( 20000units * Rs.2.50) ? (10000 units *Rs. 3)

Change in units

20,000 ? 10,000

= Rs.20000

= Rs. 2

10000 units

Q.12.Plant is operating at 60% capacity. The fixed costs are Rs. 30,000, the variable costs are Rs. 1,00,000 and sales amount to Rs. 1,50,000 the percentage of capacity at which the plant should operate to earn a profit of Rs.40,000 will be :

(A) 80% (B) 84% (C) 90% (D) 94%

Answer:- (B)

Explanation:- proportion method (%) =

60% * 2,10,000 = 84%

Rs. 1,50,000

Working notes

1. Contribution = Sales- variable cost = Rs. 1,50,000 ? Rs.1,00,000 = Rs. 50,000

2. P/V ratio = Contribution * 100 = 50,000 * 100 = 33.33%

Sales

1,50,000

3. Desired sales = Fixed cost + profit = Rs.30,000+ Rs. 40,000 = Rs. 70,000

P/v ratio

33.33%

33.33%

= Rs. 2,10,000

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